Question 1

If average movie ticket prices rise by about 5 percent and attendance falls by about 2 percent, other things being equal, the elasticity of demand for movie tickets is about:

Accepted Answer

A) 0.0. 
B) 0.4. 
C) 0.6. 
D) 2.5.

Question 2

Demonstrate graphically and explain verbally the impact of an increase in income on the demand of a normal good.

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The answer of Demonstrate graphically and explain verbally the impact...

Question 3

Demonstrate graphically and explain verbally the impact on price and quantity when supply decreases and demand is highly elastic.

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The answer of Demonstrate graphically and explain verbally the impact...

Question 4

What is the cross-price elasticity of demand?

Accepted Answer

The answer of What is the cross-price elasticity of demand?...

Question 5

Demonstrate graphically and explain verbally a perfectly elastic demand curve.

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Question 6

An economist estimates that on average, for every 1 percent increase in income, the quantity of European cars demanded increases by 1.93 percent. From this information one can conclude that European cars are:

Accepted Answer

A) a luxury. 
B) a necessity. 
C) an inferior good. 
D) a negative good.

Question 7

Repeated hurricanes in Florida have caused some retirees to choose to retire to Arizona instead. Based on this information, retirement housing in Florida and that in Arizona are what kinds of goods?

Accepted Answer

A) Florida housing has become an inferior good, and Arizona housing had been a luxury good. 
B) Florida housing has become a luxury good, and Arizona housing had been an inferior good. 
C) Florida housing and Arizona housing are substitutes. 
D) Florida housing and Arizona housing are complementary goods.

Question 8

What is the key factor in determining how elastic or inelastic a demand curve will be? Explain.

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The answer of What is the key factor in determining...

Question 9

Refer to the table shown to answer the question. Between $2.20 and $2.40, demand is: $$\begin{array} { | c | c | } 
\hline \text { Price } & \text { Qu.ntity Demanded } \
\hline \$ 1.60 & 130 \
\hline \$ 1.80 & 120 \
\hline \$ 2.00 & 110 \
\hline \$ 2.20 & 100 \
\hline \$ 2.40 & 90 \
\hline \$ 2.60 & 80 \
\hline
\end{array}$$

Accepted Answer

A) elastic. 
B) unit elastic. 
C) inelastic. 
D) perfectly elastic.

Question 10

Refer to the graph shown. Calculate the approximate average elasticity of demand as the price falls from $18 to $0:

Accepted Answer

A) 3. 
B) 1. 
C) 2/3. 
D) 3/2.

Question 11

How can the income elasticity of demand be used to determine whether a good is a normal good or an inferior good?

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The answer of How can the income elasticity of demand...

Question 12

If the supply curve intersects the vertical (price)axis, the supply curve has an elasticity:

Accepted Answer

A) less than 1. 
B) equal to 1. 
C) greater than 1. 
D) that is indeterminate.

Question 13

Suppose you own two Domino's Pizza franchises in your town.After reading the latest issue of Pizza Monthly,you have concluded that both of your locations are generating below average revenue.You hire a local economics professor to conduct a pricing experiment.Here is her report:
Location 1: A 10% increase in price resulted in a 5% drop in the quantity demanded.
Location 2: A 10% increase in the price resulted in a 20% drop in the quantity demanded.
Using this information,how should you alter your pricing policy to increase your revenue at each location?

Accepted Answer

The answer of Suppose you own two Domino's Pizza franchises...

Question 14

If quantity demanded changes infinitely when the price changes, the demand:

Accepted Answer

A) is slightly elastic. 
B) is inelastic. 
C) is unit elastic. 
D) is perfectly elastic.

Question 15

If the price of corn goes up by $1 a bushel and the quantity supplied rises by 100 bushels, the price elasticity of supply has to be 100.

Accepted Answer

A) True 
 B)False

Question 16

George Davis and Michael Wohlgenant estimate that for every 1 percent increase in the price of Christmas trees, quantity demanded falls by 0.6 percent. The demand for Christmas trees is:

Accepted Answer

A) inelastic. 
B) elastic. 
C) perfectly inelastic. 
D) unit elastic.

Question 17

What will happen to total revenue of a firm if it raises its price and its demand is elastic (or inelastic)?

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Question 18

The elasticity of demand for sunscreen is 0.8 and the elasticity of supply is 2.2.Suppose that the demand for sunscreen increased by 10% during an unseasonably hot month.Calculate the percentage change in the equilibrium price of sunscreen.

Accepted Answer

The answer of The elasticity of demand for sunscreen is...

Question 19

Refer to the graph shown. At which point is elasticity zero?

Accepted Answer

A) A 
B) B 
C) C 
D) D

Question 20

If supply is highly elastic and demand shifts to the left:

Accepted Answer

A) price will fall significantly; quantity hardly changes at all. 
B) price will hardly change at all; quantity will fall significantly. 
C) price will fall significantly as will quantity. 
D) price and quantity will hardly change at all.

Exam 6: Describing Supply and Demand: Elasticities